Two separate audit reports by the Nigeria Extractive Industries Transparency Initiative have revealed the Nigerian government diverted a whopping sum of N908.63 billion meant for the Natural Resource Development in ten years.
These audit reports reviewed the Fiscal Allocation and Statutory Disbursement of the Federal Government between 2007 to 2011 and 2012 to 2016. In these two audits, the Nigeria Extractive Industries Transparency Initiatives, NEITI, stressed the federal government continues to abuse its powers to misappropriate the Development of Natural Resource Funds (DNRF). This is despite the incessant questioning and inquiry by the National Assembly into the use of the funds.
The latest audit report for 2012 to 2016 by the Nigeria Extractive Industries Transparency Initiative revealed the Nigerian government diverted a whopping sum of N543.628 billion meant for the Natural Resource Development.
While the former audit report for 2007 to 2011 showed the federal government previously withdrew over N365 Billion contrary to the purpose of setting up the Fund.
For both reports spanning ten years, the federal government used the DNRF as a borrowing purse to meet its obligations. Sundry purposes of the misappropriation include: servicing budget deficits, purchase of fertilizer, release to Ministry of Agriculture, release to Ministry of Water Resources, monetisation arrears for PHCN Staff, and to PENCOM for the purchase of Head office. The diverted funds were also used to fund expenditures of government agencies including the Independent National Electoral Commission, the Armed Forces amongst others.
These disbursements were tagged as loans but according to the report, most of the loans granted have appeared unrecoverable.
The Development of Natural Resource Funds (DNRF)
Nigeria’s inability to secure generous revenue proceeds from oil, coupled with the economic challenges of cyclical recession manage birthed the debate about expanding the country’s revenue base. In a bid to achieve resource diversification and to move the country away from its reliance on petroleum for revenue, the Natural Resource Development Account was established in July 2002.
Sources of revenue ploughed to the fund include excess crude oil allocation, exchange gain, the share of SURE-P, share from non-oil revenue, contractual obligation, share from excess petroleum profit tax (PPT) and refunds.
Since the government established DNRF in 2002, trillions of naira have accrued to the account. It’s unclear what proportion of this has actually been utilised for the purpose for which the fund was created in the first place.
Unfortunately, Nigeria has failed to transform billions saved in the DNRF account to the sustainable development of the natural resource sector. This explains the low capacity of the country’s economic diversification.
There is an obvious lack of commitment on the part of the government to make this fund serve its original purpose. This assertion is supported in the FASD report when it said ‘the utilisation of the fund does not match the purpose for which the fund was established’
One major problem underlying the Natural Resource Development Fund according to the NEITI is that there are no legal/constitutional backings on this account. Until this Fund be passed into an act, legal actions cannot be taken against the Federal Government for the misuse of its funds.
One of the underlying problems of the fund is the lack of legal backing. The Speaker of the House of Representative Hon. Yakubu Dogara in a report decried the diversion and abuse of the fund to areas that are outside its core purpose.
How the DNRF Was Misappropriated
A review of financial records of the DNRF showed the allocations between 2007 and 2011 was N365 billion. This is shown in the table below
A review of the operations of the Fund from 2007 to 2011 showed that the proceeds were not utilised for the purpose for which the Fund was established. Rather, it served as a borrowing Fund for the Federal Government to meet its obligations.
Between 2007 and 2011, the sum of N275,000,000,000 was released as loans from the Development of Natural Resources Fund to finance budget deficits.
The sum of N94, 836,298,921 was released from the Fund between 2007 and 2011 to Fertilizer Revolving Account. Within the same period, the refund made to the account by various state governments on procurement of fertilizer was N66, 089,822,502.
Also from the fund between 2007 and 2011, the sum of N106, 185,950,000 was released from the Development of Natural Resources Fund to the Ministry of Agriculture, another act that run contrary to the purpose of the fund.
The Details of other Funds spent from the Development of Natural Resources Fund contrary to the sole purpose of the establishment of the account between 2007 and 2011 amounted to N63, 488,085,669.
DNRF between 2012 – 2016
The Fiscal Allocation and Statutory Disbursement (FASD) Audit also showed that from 2012-2016, the operation of the development of natural resource fund proceeds served as borrowings for the Federal government to meet its obligations.
The total amount disbursed during this review was N543.628 billion. Some of the government’s obligations financed through this are shown in the table below:
| Year | Government Obligations | Amount (N) |
| 2015 | Release of funds to hydropower | 9,351,350,000 |
| 2012-2016 | Release of funds to the Office of the Senior Special Assistant to the President (OSSAP) | 6,939,216,988 |
| 2012-2015 | Release of funds to consolidated revenue fund | 85,500,000,000 |
| 2012-2016 | Release of funds to Federal Ministry of Agriculture and Rural Development (FMARD) | 51,209,192,998 |
| 2012-2013 | Release of funds to Federal Ministry of Water Resources (FMWR) | 107,251,914,952 |
| 2013 | Release of Funds to Federal Ministry of Environment and Health | 679,200,000 |
| 2014-2016 | Release of funds to the office of the National Security Adviser | 42,586,371,557 |
| 2014-2015 | Release of fund to Independent National Electoral Commission | 30,000,000,000 |
| 2013 | Release of funds to the Ministry of Mines and Steel Development | 158,300,000 |
| 2014 | Release of funds to the Nigeria Armed Forces | 10,933,325,100 |
Potentials of a Developed Natural Resource Sector
Though Nigeria’s economy is highly dependent on oil as the main source of revenue, the country has over fifty (50) natural resources cut across the thirty-six states of the Federation and the Federal Capital Territory. These resources include limestone, gold, coal, gypsum, kaolin, sapphire, granite, copper, iron ore, sand, clay, laterite, bitumen amongst others.
According to a report, the natural resources sector of Nigeria loses 50 trillion annually to untapped resources.
The Nigeria Investment Promotion Commission (NIPC) in a report estimated that the current commercial value of seven of the country’s solid minerals [Iron ore, Coal, Lead/Zinc, Bitumen, Gold, Limestone and Barite] runs into hundreds of trillions of dollars. Indeed, Nigeria’s Ministry of Mines and Steel Development claims that the country loses about $40 billion annually in unexploited gold alone [168.29% of Nigeria’s 2017 budget of N7.28 trillion budget; higher than oil revenue in 2015 ($37billion), and far higher than the 2016 oil revenue of $26billion.]
Way Forward
A number of recommendations have been made by the NEITI in the two audit report – 2007 to 2011 and 2012 to 2016. For example, the former report recommended an appropriate legal framework be put in place to enable the funds to fulfil the obligations on which it was built. Also, the report stressed the need to carry out an audit on transactions from the inception of the fund to date. Also, effort should be made to have a committee by the Federal Government to recover all unpaid loan from the Fund.